PERMIAN BASIN ROYALTY TRUST ANNOUNCES MARCH CASH DISTRIBUTION AND EXCESS COST POSITION ON WADDELL RANCH PROPERTIES

Rhea-AI Summary

Permian Basin Royalty Trust (NYSE: PBT) has announced a cash distribution of $0.018047 per unit, payable on April 14, 2025, to unitholders of record on March 31, 2025. The distribution shows a slight increase from the previous month due to higher oil and natural gas volumes from Texas Royalty Properties, along with improved oil pricing.

The Trust reported that the Waddell Ranch properties continue to be in an excess cost position, with no proceeds included in the March distribution. Notably, Blackbeard, the operator, has refused to provide monthly NPI proceeds information, leading to ongoing litigation where the Trust seeks over $25 million in damages related to disputed overhead charges and other expenses.

For Texas Royalty Properties, production reached 14,957 barrels of oil and 9,462 Mcf of gas, with average prices of $70.81 per bbl for oil and $7.88 per Mcf for gas. After deductions, the net contribution from Texas Royalty Properties was $1,081,481 to this month's distribution.

Positive

• Slight increase in distribution compared to previous month
• Higher oil and natural gas volumes from Texas Royalty Properties
• Higher oil pricing in the reported period
• Net contribution of $1,081,481 from Texas Royalty Properties

Negative

• Waddell Ranch properties remain in excess cost position with no proceeds
• Blackbeard's refusal to provide monthly NPI proceeds information
• Ongoing litigation with operator over $25 million in disputed charges
• Lower natural gas pricing affecting revenues

Insights

Financial Analyst

Permian Basin Royalty Trust's March distribution of $0.018047 per unit reflects significant operational challenges. The most concerning aspect is the continuing excess cost position at the Waddell Ranch properties, meaning these assets contributed nothing to the current distribution. With the Trust's $473.5M market cap and $10.16 share price, this distribution represents an annualized yield of just 2.13% if maintained at current levels.

The distribution relies entirely on the Texas Royalty Properties, which generated $1,276,384 in revenues and $1,138,401 in net profit. After applying the Trust's 95% net profits interest, these properties contributed $1,081,481 before administrative expenses of $240,308.

The deteriorating relationship with Blackbeard Operating is particularly troubling. Their refusal to provide monthly information necessary to calculate the Waddell Ranch net profits interest severely impacts transparency and potentially delays rightful distributions. This communication breakdown represents a material operational risk for unitholders.

The $25M+ litigation against Blackbeard (representing over 5% of the Trust's market cap) could eventually recover significant value, but with trial scheduled for November 2025, any resolution remains distant. The dispute centers on overhead charges, duplicate charges, and allegedly ineligible expenses improperly deducted from royalty payments.

This situation underscores the unique vulnerabilities of royalty trusts, where unitholders have recourse when operators potentially misapply trust agreements. While energy prices remain supportive with oil at $70.81/bbl and gas at $7.88/Mcf for the Texas properties, the administrative and operational challenges are significantly constraining unitholder returns.

Legal Expert

The expanding litigation between Permian Basin Royalty Trust and Blackbeard Operating represents a material legal development with significant financial implications. The Trust has escalated its claims, now seeking damages exceeding $25 million related to allegedly improper deductions from royalty payments spanning 2020-2023.

Blackbeard's counterclaim and operational response are particularly concerning. By switching from monthly to quarterly reporting and refusing to provide information necessary to calculate monthly distributions, Blackbeard has effectively altered the Trust's operational framework. This tactical move appears directly related to the litigation and creates immediate financial consequences for unitholders.

The core legal dispute involves several complex accounting issues: incorrect overhead charges, application of overhead to non-producing wells, duplicate charges for services/materials/utilities, and other allegedly ineligible expenses. Blackbeard's counterclaim specifically seeks judicial declaration that certain disputed overhead charges are permissible deductions and that they can limit information provided to quarterly statements.

The November 2025 trial date means this dispute will continue affecting distributions for at least 18 months. The ongoing discovery process, including on-site property audits and expert witness analyses, indicates a complex technical case that will likely involve detailed accounting testimony and contractual interpretation.

This case highlights the inherent agency problems in royalty trust structures, where operators control both operations and financial reporting while potentially having incentives to maximize deductions. The litigation's outcome will establish important precedent regarding operator transparency obligations and permissible expense deductions that could impact other royalty trusts beyond Permian.

DALLAS, March 21, 2025 /PRNewswire/ -- Argent Trust Company, as Trustee of the Permian Basin Royalty Trust (NYSE: PBT) ("Permian" or the "Trust") today declared a cash distribution to the holders of its units of beneficial interest of $0.018047 per unit, payable on April 14, 2025, to unit holders of record on March 31, 2025. The distribution does not include proceeds from the Waddell Ranch properties, as total production costs ("Production Costs") exceeded gross proceeds ("Gross Proceeds") for the month of February, resulting in a continuing excess cost position for the Waddell Ranch properties. More information regarding the Waddell Ranch properties is described below.

This month's distribution slightly increased from the previous month due primarily to the Texas Royalty Properties having higher oil and natural gas volumes, along with higher oil pricing, partially offset by lower natural gas pricing for the month reported.  

WADDELL RANCH

Notwithstanding requests from the Trustee to Blackbeard, the operator of the Waddell Ranch properties, and the fact that prior to May 2024, Blackbeard has provided this information on a monthly basis since Argent Trust Company has become Trustee of the Trust, Blackbeard has refused to provide the Trustee information necessary to calculate the net profits interest ("NPI") proceeds for March 2025 as of the announcement date for this month's distribution. As a result of Blackbeard's failure to provide this information by the NYSE notification date for the distribution, in accordance with the Trust indenture, if NPI proceeds are received from the Waddell Ranch properties on or prior to the record date, they will be included in the April distribution.

As noted above, no proceeds were received by the Trustee in February 2025 to be included in the March distribution.  All excess costs, including any accrued interest, will need to be recovered by future proceeds from the Waddell Ranch properties before any proceeds are distributed to the Trust. Due to the fact that Blackbeard is providing production, pricing and cost information quarterly instead of monthly, the Trustee will be providing that information in the quarterly reports on Form 10-Q and annual reports on Form 10-K for the foreseeable future (to the extent timely received from Blackbeard).

TEXAS ROYALTY PROPERTIES

Production for the underlying Texas Royalty Properties was 16,839 barrels of oil and 10,659 Mcf of gas. The production for the Trust's allocated portion of the Texas Royalty Properties was 14,957 barrels of oil and 9,462 Mcf of gas. The average price for oil was $70.81 per bbl and for gas was $7.88, which includes significant NGL pricing, per Mcf. This would mainly reflect production and pricing in December for oil and November for gas. These allocated volumes were impacted by the pricing of both oil and gas. This production and pricing for the underlying properties resulted in revenues for the Texas Royalty Properties of $1,276,384. Deducted from these revenues were taxes and expenses of $137,983, resulting in a Net Profit of $1,138,401 for March. With the Trust's NPI of 95% of the Underlying Properties, this would result in a net contribution by the Texas Royalty Properties of $1,081,481 to this month's distribution.

	Underlying Properties		Net to Trust Sales
	Volumes		Volumes		Average Price
	Oil (bbls)	Gas (Mcf)	Oil (bbls)	Gas (Mcf) (1)	Oil (per bbl)	Gas (per Mcf) (2)
Current Month
Waddell Ranch	(3)	(3)	(3)	(3)	(3)	(3)
Texas Royalties	16,839	10,659	14,957	9,462	$70.81	$7.88
Prior Month
Waddell Ranch	(3)	(3)	(3)	(3)	(3)	(3)
Texas Royalties	15,307	9,971	13,469	8,774	$68.37	$8.38

(1) These volumes are net to the Trust, after allocation of expenses to Trust's net profit interest, including any prior period adjustments.

(2) This pricing includes sales of gas liquid products.

(3) Information is not being made available monthly but may be provided within 30 days next following the close of each calendar quarter. To the extent the Trustee receives such information timely following the quarter, information will be included in the Trust's quarterly report on Form 10-Q for the applicable quarter (or the annual report on Form 10-K with respect to the fourth quarter).

General and Administrative Expenses deducted for the month, net of interest earned were $240,308 resulting in a distribution of $841,173 to 46,608,796 units outstanding, or $0.018047 per unit.

The worldwide market conditions continue to affect the pricing for domestic production. It is difficult to predict what effect these conditions will have on future distributions.

TRUST LITIGATION

On May 8, 2024, the Trustee announced that it had initiated a lawsuit by filing a petition in the District Court of Tarrant County, Texas against Blackbeard Operating, LLC ("Blackbeard"), the operator of properties in the Waddell Ranch, in Crane County, Texas, in which the Trust holds a 75% net overriding royalty. On June 10, 2024, Blackbeard filed its original answer and counterclaim to the lawsuit. The trial date in the District Court of Tarrant County is scheduled for November 17, 2025, 8:30 a.m., Central Time. Discovery is ongoing, including on-site audits of the Waddell Ranch properties, engagement of and analyses by expert witnesses, and review of documents provided by Blackbeard.

Under the original petition, the Trustee sought to recover more than $15 million in damages to the Trust resulting from overhead costs and other expenses the Trustee alleges were impermissibly deducted from royalty payments to the Trust. The Trustee routinely engages in audits of the revenues and expenses with respect to the Trust's royalty payments. In connection with its audit for the period from 2020-2022 the Trustee identified exceptions to certain expenses deducted from the Trust's royalty payments, including among other things, incorrect overhead charges, application of overhead charges to non-producing wells, duplicate charges for services, materials and utilities as well as other expenses the Trustee alleges are ineligible charges. The Trustee's petition was amended in September 2024 to add additional claims relating to the 2023 audit and production volumes, seeking damages of more than $25 million. Attempts to resolve the disputed charges outside of court have been unsuccessful to date. Included in Blackbeard's original answer and counterclaim are requests for declaratory judgment by the court that it may deduct certain disputed overhead charges from Trust royalty payments and that it may limit information it provides to the Trust to quarterly statements of the net proceeds computation and inspection of books and records during normal business hours.

The 2024 Annual Report with Form 10-K, which includes the December 31, 2024, Reserve Summary, has been filed with the Securities Exchange Commission. Permian's cash distribution history, current and prior year financial reports, tax information booklets, and a link to filings made with the Securities and Exchange Commission, all can be found on Permian's website at http://www.pbt-permian.com/. Additionally, printed reports can be requested and are mailed free of charge.

FORWARD-LOOKING STATEMENTS

Any statements in this press release about future events or conditions, and other statements containing the words "estimates," "believes," "anticipates," "plans," "expects," "will," "may," "intends," and similar expressions, other than historical facts, constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Factors or risks that could cause the Trust's actual results to differ materially from the results the Trustee anticipates include, but are not limited to the factors described in Part I, Item 1A, "Risk Factors" of the Trust's Annual Report on Form 10-K for the year ended December 31, 2024, and Part II, Item 1A, "Risk Factors" of subsequently filed Quarterly Reports on Form 10-Q.

Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements included in this press release represent the Trustee's views as of the date hereof. The Trustee anticipates that subsequent events and developments may cause its views to change. However, while the Trustee may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Trustee's views as of any date subsequent to the date hereof.

Contact: Jana Egeler, Vice President, Argent Trust Company, Trustee, Toll Free – 1.855.588.7839

 

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SOURCE Permian Basin Royalty Trust

FAQ

What is the March 2025 distribution amount for PBT shareholders?

PBT announced a distribution of $0.018047 per unit, payable on April 14, 2025, to unitholders of record on March 31, 2025.

How much is PBT seeking in damages from Blackbeard in the ongoing litigation?

PBT is seeking over $25 million in damages related to disputed overhead charges and other expenses from Blackbeard.

What was the production and pricing for PBT's Texas Royalty Properties?

Production was 14,957 barrels of oil at $70.81/bbl and 9,462 Mcf of gas at $7.88/Mcf, resulting in a net contribution of $1,081,481.

Why are there no proceeds from PBT's Waddell Ranch properties in the March distribution?

Production costs exceeded gross proceeds, resulting in a continuing excess cost position for the Waddell Ranch properties.